How to survive an EMDG Audit

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Picture this scene on Audit day: an anxious client, Suzy, hopeful to receive thousands of dollars in Grant funding for their Export Marketing and sales activities, a calm and collected EMDG consultant ready for the barrage of questions about to come their way, and an ominous no-nonsense looking auditor armed with a big leather briefcase filled with incriminating evidence that will pick holes in Suzy’s claim.

 

How will this stand-off end?

 

The above description might aptly illustrate the feeling in the pit of Suzy’s stomach on audit day, but it is very far from the reality of how an audit process plays out when you are well prepared by a competent EMDG consultant.

 

After working on hundreds of successful EMDG Audits for Rimon Advisory, I am confident when I say that the process should be smooth and efficient whereby both the client and the auditor walk away informed and excited to receive and distribute the Grant funding respectively.

 

Rewind for a moment. The EMDG (Export Market Development Grant) is a generous Government grant which encourages businesses to develop and foster their export markets. The EMDG reimburses up to 50% of eligible export market development expenses in excess of $5,000, up to a total of $150,000 per year. Overseeing the grant is the Government body Austrade, tasked with ensuring that only eligible participants receive funding – hence the Audit process.

 

For a 2 minute explanation of the grant, watch the above video.

 

Contrary to the above scene, Austrade auditors in most instances are super interested in your business and want to ensure you receive much needed funding to help expand your brand in overseas markets. However, both claimants and consultants need to respect that the Austrade team have to protect tax payer funds, and therefore need to ensure the integrity of the programme.

Below are key areas that the auditor will be looking at when assessing if your claim is eligible, some are obvious and others less so:

 

   1. Backdrop 

This is a strange point, but I do believe it is the most crucial to the success of the audit as it sets the tone for the entire process. When an auditor walks into an office, they are trying to grasp a “feel” for the business, the sense that this is a legitimate operation with all the qualities of a normal entity. You want to set the context, take the auditor for a walk around the premises, introduce him/her to your staff, show the auditor detailed processes.

For example, for a fashion claim the auditor is looking for proof that design of the product happens in Australia (particularly in the case where manufacturing is taking place overseas). Thus, it is very comforting when the auditor sees your creative mood board with designs, and the head of your creative team hard at work. The same principle will apply to a software product, a food product, as well as a services-based client. The bottom line is that spending 15 to 20 minutes at the start of an audit demonstrating the above will often streamline the procedure, as the auditor is satisfied with 60% of your claim before the formal process has even commenced.

 

 

   2. Attitude

I have on the odd occasion been caught in the middle of a very uncomfortable set of variables: a very entitled client who distrusts government and dislikes auditors, and wants the audit to be over and done with as quick as possible. Auditors are perceptive and will subconsciously pick up on your negative attitude (sometimes it is hard to miss). Know the following, because almost all the auditors I have engaged with are:

    • Interested in your business and learning from your expertise
    • Want to make sure you get the funding you deserve and see your business flourish
    • Fair and open to listening to your story
    • Bound to the rules of the EMDG


If you are warm, open, honest, sincere and share the details of your business and your journey, they jump on board for the ride!

 

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   3. Eligibility and Quality of the claim. 

All the pointers listed above are essential, but above all, your submitted claim needs to be of the highest quality. Are you truly eligible? Are all your expenses taken up on your P&L? Do amounts claimed match bank statements? Do your contracts meet the criteria? Are your descriptions on your invoices clear? Does your revenue flow back into the correct entity? Does your overseas entity fit into the EMDG eligibility rules? These are only a few areas of criteria, but I think you get the point.

Your consultant needs to competently go through all the details with you to pre-empt issues in the first instance. The more airtight your claim is, the better your chances are in an audit. Here is a long and extensive list of relevant EMDG Legislation underpinning the Grant.

 

   4. Know your claim 

I have witnessed an auditor turn to the owner of the business and ask a question about a particular overseas sales representative in the USA, or a marketing consultant, or google AdWords spend, and the owner has a blank look on their face. A good consultant will jump in and save the day, but the auditor remains suspicious when a business owner is unaware of the major marketing expenses in their business.

Rimon Advisory introduced a ‘practice audit process’ where we prepare our clients by going through the claim and familiarising them with expenses, jog their memories, and ensure that they have sufficient knowledge to answer the auditor in an accurate manner. This is another major contributing factor to our successful audits.

 

The audit process can and should be a straightforward positive experience whereby all stake holders walk away satisfied, but like everything in life, you are going to need expertise and preparation.

 

You may be interested to know if your business could use the Export Market Development Grant.

We have put together a few quick questions for you to be able to assess your eligibility.

Click below if you want to know more:

Check Eligibility

 

Evan Widmonte is a Director at Rimon Advisory, a leading Australian R&D Tax Incentive and Export Market Development Grant consulting firm.

Evan is a registered CFA and has many years of experience working with Australian Entrepreneurs.